Here’s what you need to know about how this act affects your individual retirement account:
Can you take money from your retirement account?
Yes. And, in fact, the CARES Act has loosened restrictions by waiving the 10% early withdrawal penalty. This allows you to withdraw up to $100,000 from your IRA without penalty.
Can you replace the money that you take out to avoid paying income tax on it?
Yes. But you will have three years to pay the taxes on the money that you withdraw and can also return money during this time to avoid paying taxes on the full amount.
Is it the same with 401(k) plans?
Sort of, but with a 401(k), you are not taking your own money, you are either taking a distribution or loan against assets. However, the 10% penalty has been waived.
Can you borrow, instead of withdrawing, from your IRA?
Can you stop required minimum distributions, if over the age of 72?
Yes, you can stop the required minimum distributions through 2020.
“If your business is hurting or you have bills coming in with no way to pay them, using an early withdrawal from your IRA is smart, provided you have a plan to return those funds to the account as soon as possible to avoid owing the taxes. This one-time waiver of the 10% penalty makes it less painful to do.”